UKRAINE: PRESIDENTIAL SECRETARIAT AND OU-PSD

C O N F I D E N T I A L SECTION 01 OF 04 KYIV 002634

SIPDIS

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E.O. 12958: DECL: 10/17/2017
TAGS: PGOV PREL UP
SUBJECT: UKRAINE: PRESIDENTIAL SECRETARIAT AND OU-PSD
PROMOTE THIRD WAY

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Classified By: Ambassador for reasons 1.4(b,d).


1. (C) Summary. Leader of Our Ukraine-People's Self-Defense
Bloc Yuriy Lutsenko and Deputy Head of the Presidential
Secretariat Roman Bezsmertniy told the Ambassador in separate

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meetings October 16 that OU-PSD and President Yushchenko
would support an orange coalition and Tymoshenko to be Prime
Minister; however, the end goal for their team was a
"technical" government, led neither by Tymoshenko or
Yanukovych, but by someone neutral, such as Presidential
Chief of Staff Baloha. They both described variations of the
same plan, where Tymoshenko would become prime minister,
serve briefly, and then be removed for failing to achieve key
goals. With a deadlock in the Rada -- neither BYuT nor
Regions would be able to form a new coalition without OU-PSD
-- the President's team would suggest a technocratic PM and
Cabinet, backed by a loose configuration of OU-PSD, Regions,
and Lytvyn Bloc. This arrangement would be temporary, one to
two years, while the constitution was rewritten to clarify
the power structure in Ukraine. Then there would be new
elections. Former presidential spokesman and new MP for
OU-PSD Irina Gerashchenko told us that her bloc is solidly
behind Tymoshenko and the orange coalition. Perhaps a sign
that this is now the official plan, President Yushchenko on
October 16 endorsed the orange coalition agreement between
OU-PSD and BYuT.


2. (C) Comment. Lutsenko and Bezsmertniy's plan, although
very complicated, could work, but underscores how unstable
Ukraine's government is likely to be for the next six to
twelve months. Moreover, the success of the strategy is
based on the other parties reacting as the Presidential
Secretariat has calculated they will. The first test will be

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whether the Secretariat and OU-PSD can convince the few
holdouts in OU, such as former PM Yekhanurov and NSDC
Secretary Plyushch, to vote for Tymoshenko as PM despite

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their outspoken opposition to her. The President's team is
also gambling that Regions' threat to not take their seats is
a bluff and that Regions will wait quietly in the opposition
until OU-PSD is ready for stage two. Finally, Lytvyn Bloc
could still swing events. As Bezsmertniy told the
Ambassador, if Lytvyn is willing to formally join the orange
bloc, that would significantly strengthen Tymoshenko's
position and give her government some staying power. On the
other hand, if he openly allied with Regions, that might
persuade some opponents within OU-PSD and BYuT to switch
sides and join a new broad coalition. Finally,
Gerashchenko's comments highlight the fact that this new
strategy may come as a surprise for many within OU-PSD,
suggesting once again that these political intrigues could in
the end split the President's party. End summary and comment.

Lutsenko: Our Two-Step Plan
--------------


3. (C) OU-PSD leader Lutsenko, looking much more relaxed and
confident than the last time we saw him, told the Ambassador
October 16 that finally the President had approved a plan for
government formation, which would take place in two stages.
First, the orange coalition agreement will be signed and
Tymoshenko will be confirmed as Prime Minister. Lutsenko was
confident that Tymoshenko will get all 228 votes from BYuT
and OU-PSD, plus maybe 10-20 votes from the Lytvyn Bloc. He
acknowledged that there are seven or eight people in OU who
hate Tymoshenko -- including Yuriy Yekhanurov, Ivan Plyushch,
Volodymyr Stelmakh, and Valeriy Borysov -- but he believed
that they will all do what the President says; Yushchenko had
said directly to Lutsenko on October 15 that he would
instruct them to vote for Tymoshenko. Of course, Regions
would try to interfere. Deputy Prime Minister Andriy Klyuyev
had offered Lutsenko 20 million (he did not say whether it
was hryvnia or dollars) to stay silent about his coalition
preferences, so he could just imagine how much money was
being thrown at MPs to encourage them to defect.


4. (C) Tymoshenko would then have two-three months as prime
minister to produce results. If she let economists like
Viktor Pynzenyk and Serhiy Terokhin run economic reform, then
maybe she would actually accomplish something. However,
Lutsenko had his doubts. He thought her economic ideas --
renationalizing all heating and energy companies, repaying
the 130 billion hryvnia (about 26 billion USD) from defunct
Soviet Sberbank (Oshchadbank in Ukrainian) to investors in
only two years, releasing all conscripted soldiers on January
1, 2008 -- showed that she was little better than a
communist. Most likely, she will fail.


5. (C) Step two will be to remove Tymoshenko. Then, at that
point, presented with a situation where there are not enough
MPs to support a BYuT prime minister or a Regions prime

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minister, because OU-PSD will make sure their votes properly
split between the two sides, Lutsenko and the President will
propose a "technocratic, apolitical, and temporary"
government. Lutsenko said that because the constitution does
not require a new coalition to be formed if the previous one
falls apart, Yushchenko can decide to allow the Rada to
continue without a formal majority. This will allow OU-PSD
to cooperate with Regions without having to formally go into
coalition together. Lutsenko did not say who the Prime
Minister would be in this scenario, but named some others who
might make good ministers, including Volodymyr Radchenko as
Interior Minister and Roman Shpek as Economy Minister. This
temporary, technocratic prime minister would have to be
subject to a law banning him, or possibly the whole
technocratic cabinet, from running for president in the next
election, so that people would understand that this was not a
power grab but a serious effort to implement some policies.

Regions Will Go Along in the End
--------------


6. (C) Lutsenko believed Regions would cooperate with this
scenario because people like Akhmetov and Kolesnikov wanted a
functioning government. Regions was already offering to give
OU-PSD everything they want to back Yanukovych as PM. In the
end, Akhmetov and Kolesnikov knew Yanukovych's political
career was coming to an end and they would agree to
cooperation without Yanukovych as PM. He added that it would
be helpful for the West to weigh in with Akhmetov and
reassure him that being in the opposition was not the end of
the world. In addition, according to Lutsenko, Yushchenko
was still considering giving the Speakership to Regions for
someone like Raisa Bohatyreva so that Regions felt it had
something to show its electorate.


7. (C) Lutsenko argued that this was the only workable plan
for forming a government. To go straight to a Regions
coalition with Baloha as PM would be political suicide for
OU-PSD. Their voters expected them to at least try a
coalition with BYuT. He said he was confident that he and OU
leader Kyrylenko controlled 40 MPs in the OU-PSD faction, so
they could block a broad coalition with Regions and Lytvyn
Bloc.


8. (C) Once the temporary government was in place, they would
start work on a new constitution. Lutsenko said that the
main goal was to clarify whether Ukraine was a parliamentary
system or presidential. His own view was that if Yushchenko
wanted to be reelected, he would have to choose a
parliamentary system where the president was elected by the
parliament and was more ceremonial. Lutsenko was sure that
Yushchenko would never again win a competitive election.
(Note. On October 16, longtime Yushchenko adviser Oleh
Rybachuk told the Ambassador that he, Bezsmertniy, and
Vitaliy Haiduk have all bluntly warned the President that he
will not be reelected. End note.) In this form of
government, Lutsenko would want governors and raion heads to
be popularly elected to break the vertical of power from the
president's office over local self-government.

Lutsenko's Personal Ambition to Run Kyiv
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9. (C) As for his own future, Lutsenko wanted to be in charge
of Kyiv; this was the only way where he could tangibly
demonstrate that he was serious about reform, fighting
corruption, and implementing change. One of the 12 laws that
OU-PSD now wanted passed before the prime minister's
confirmation vote would separate the positions of mayor of
Kyiv and head of the Kyiv city administration (which has the
same status as an oblast governor). Most of the power for
city administration would be transferred to the
administration head and the mayor would become ceremonial.
If this law was not passed right away, Lutsenko would take a
deputy prime minister position under Tymoshenko until the law
was approved. He said that he will also work with OU to form
a new, unified political party in order to prevent the
development of a two-party system.

Bezsmertniy Tells a Similar Tale
--------------


10. (C) Presidential Administration Deputy Head and Our
Ukraine political insider Roman Bezsmertniy told a similar
story to the Ambassador October 16 -- Tymoshenko might get
her chance to lead an orange coalition government, but it
would probably be unstable and short-lived. When the orange
coalition collapsed, Presidential Administration head Baloha
would end up as a technocratic Prime Minister for the next
year, as the President and political leaders turned to

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constitutional reform. Sketching out the numbers with one of
his multiple color pencils, Bezsmertniy put 228 votes in the
orange column versus 222 votes for a combined
Regions/Communist/Lytvyn Bloc force. In his view, a three
vote majority was a serious margin for Europe, but not for
Ukraine. He noted that Lytvyn had a key role to play -- if
he threw in his lot with orange, then they would have a 248
seat majority and the game would be over. However,
Bezsmertniy thought it far more likely that Lytvyn would
watch and wait, and after a vote was taken on a Tymoshenko
premiership, he would move to the Regions-led opposition,
where he felt more comfortable.


11. (C) Bezsmertniy dismissed a broad coalition as
impossible since Tymoshenko controlled more than 150 seats.
If faced with a broad coalition, she could refuse to accept
BYuT's seats in the new Rada. In his view, any conflict
between Our Ukraine and BYuT could trigger this situation;
Tymoshenko's assurances to the Ambassador and others that she
would stay in the Rada and play by the rules no matter what
would be forgotten. Bezsmertniy said that OU-PSD had made
itself a hostage to Tymoshenko and it was no longer an
independent force. Bezsmertniy noted that three OU-PSD
members -- NSDC Secretary Plyushch, former PM Yekhanurov, and
former Kyiv Deputy Mayor (and Yekhanurov loyalist) Borysov --
had refused to sign the new orange coalition agreement,
bringing the total number of seats supporting orange to just
225, one short of a majority. He said that these three were
working for a broad coalition, but he was dismissive of them.
In his view, a broad coalition could easily have been
established if the Socialists had made it across the
3-percent threshold and into the Rada; the orange coalition
would have been denied and the game would have been over,
leaving Regions in the decision-maker's seat. Similarly, if
Lytvyn turned to orange, then the game would be over -- this
was the negative scenario for Regions who would then have no
choice but to start to destroy the Rada.


12. (C) Once Baloha became a technocratic PM, according to
Bezsmertniy, the President would be in the driver's seat --
his involvement gives all sides hope and keeps them in the
game. Tymoshenko could possibly be given something like the
Kyiv Mayor's job. The five key figures in politics right now
were Baloha (working with Yushchenko),NSDC Secretary
Plyushch, Regions financier Rinat Akhmetov, PM Yanukovych,
and Tymoshenko.

Reforming Constitution is Key, Other Policies Less Important
-------------- --------------


13. (C) Bezsmertniy suggested that the new government,
whatever color and form, would be temporary in nature -- both
PM and Speaker. It would only exist for the year while
constitutional reform was debated and decided. Obviously
neither Tymoshenko nor Yanukovych wanted to be a "temporary"
PM and Lytvyn didn't want to be a "temporary" Speaker.
However, it was the job of President Yushchenko, backed by
the international community, to develop new rules of the game
and then to hold a new election based on those. Otherwise,
Bezsmertniy predicted a long negotiation process resulting in
a "surrogate" government taking power. In the current
set-up, neither side was able to let the other side work and
this was a dead-end for the country. Only constitutional
change could get the country out of this situation.


14. (C) Bezsmertniy was skeptical that the "technocratic
government," in power for the year while Yushchenko pursued
constitutional reform, would accomplish much in terms of
policy; constitutional reform would take up 90 percent of the
President's time, giving him only about 10 percent of his
time to spend on policy. Bezsmertniy downplayed the
importance of WTO, NATO and EU membership for Ukraine,
arguing that the country needed to focus on its own
complicated development. He said that tough issues like
natural gas supplies from Russian would be more easily
managed with one Ukrainian center of power. Yushchenko would
take care of the issue, and the Kremlin would be happy to
deal with the President as the Ukrainian government.
Bezsmertniy acknowledged that the NSDC was "nearly
discredited," predicting that some kind of higher council
would need to be established in the new constitution in order
to coordinate the activities of all of the state bodies.

Inside OU
--------------


15. (C) Bezsmertniy concluded with several comments on the
Our Ukraine party organization. He acknowledged that
although the party leader is Yushchenko, the management of
the whole structure was controlled by Baloha. For the party

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to function, serious resources were needed and only Baloha
was in a position to provide those. Baloha's next task was
to unify the party, and as executive manager, he needed to
make Kyrylenko his political counselor and Lutsenko the
faction leader. In Bezsmertniy's view, the party
organization in the field was dead. He said that Yanukovych
and Tymoshenko had done well in the last election because of
their strong party organizations and this was why he needed
to help Baloha strengthen OU's internal structure. This was
the task ahead. Interestingly, Bezsmertniy, who was one of
the leaders of the presidential administration group working
on a new constitution earlier this year, told the Ambassador
that he would no longer be involved in this process.

Gerashchenko: A New Voice in OU
--------------


16. (C) Irina Gerashchenko, former Yushchenko press secretary
and current head of Unian wire service, is eager to take her
seat in the new Rada and support an orange coalition, she
told us October 16. She said that she was part of the new
group of young, ideological parliamentarians joining the
OU-PSD faction. In total, she said, they were 25 percent of
the faction and they were solidly behind an orange
government. She stressed that she was a firm supporter of
the President -- she joined the bloc on Yushchenko's quota --
but what the Presidential Secretariat said does not always
equal what the bloc thinks. She dismissed the threat of
Yekhanurov and his allies undermining Tymoshenko's
confirmation as unlikely.


17. (C) Gerashchenko also thought Regions would take their
seats; to not do so would lead to another election where they
would fare even more poorly than last time. The orange
coalition would offer them a law on the opposition that would
give them key Rada committees, including Budget and Free
Speech. The door was open to Lytvyn, but she warned that the
former Speaker does not control all of his MPs. (Note. A
charge we have heard from many interlocutors, who point to
the multiple key financiers of his campaign as proof. End
note.) OU, Gerashchenko admitted, had lost depth and talent
in the past couple of years and needed to rebuild.


18. (U) Visit Embassy Kyiv's classified website:
www.state.sgov.gov/p/eur/kiev.
Taylor